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Information on the CNB’s measures on the Czech financial market in Oct and Nov 2008

Information on the CNB’s measures on the Czech financial market

14 Oct 2008

After discussing the situation on world financial markets, the Bank Board decided to launch regular liquidity-supplying repo operations from 15 October. Government bonds of the Czech Republic will be used as collateral in these operations. The CNB will thus support the smooth functioning of the government bond market. This technical measure aims to prevent potential spreading of problems from foreign financial markets to the Czech financial sector.

Parameters of the liquidity-providing repo operations

  • the operations will be announced three times a week (Monday, Wednesday, Friday) and bids will be accepted usually between 12 a.m. and 1 p.m.;
  • settlement will take place on T+2 or T+1 (Monday and Wednesday operations will be settled on T+2, while Friday operations will be settled on T+1);
  • maturity will usually be two weeks;
  • banks’ bids will be fully satisfied at a fixed rate corresponding to the 2W repo rate + 10 b.p.;
  • the list of eligible collateral is published on the CNB’s website; new bond issues will not be added automatically to the list;
  • the haircut will be 2% for notes (Treasury notes as well as CNB notes) and 4% for other accepted collateral;
  • the minimum bid amount will be CZK 10 million;
  • all counterparties that have concluded the Master Agreement on trading on the financial market with the CNB will be allowed to participate in the repo operations;
  • information on the refinancing facility will be published on the CNB’s website and on the websites of Reuters (page CNB04) and Bloomberg (page CNB04).

The existing set of monetary policy instruments remains unchanged.

Counterparties to monetary policy operations pursuant to Official Information of the Czech National Bank of 20 April 2007, on the Manner of Execution of the Czech National Bank’s Operations on the Domestic Money Market, that have not concluded the Master Agreement on trading on the financial market may apply to become parties to this agreement.

The first liquidity-providing repo operation will be announced on 15 October 2008.

Adjustment of technical parameters of liquidity-providing repo operations

20 Nov 2008

At its meeting today, the Bank Board of the Czech National Bank decided to adjust technical parameters of liquidity-providing repo operations as follows:

  • maturity will be two weeks and three months;
  • repo operations with two-week maturity will be announced twice a week (Monday, Friday);
  • repo operations with three-month maturity will be announced once a week (Wednesday);
  • banks‘ bids will be fully satisfied at a fixed rate corresponding to
    • the 2W repo rate + 10 b.p. for two-week maturity;
    • the 2W repo rate + 30 b.p. for three-month maturity.

The remaining parameters of liquidity-providing repo operations remain unchanged.